WCT Holdings : Enter The Dragon HOLD

STOCK FOCUS OF THE DAY

WCT Holdings : Enter The Dragon              HOLD

We maintain our HOLD recommendation, forecasts and FV of RM1.66 which is based on a 35% discount to its SOP (in line with our benchmark of 30-40% for property stocks) and a 13x forward earnings valuation for its construction business. This is on the heels of news yesterday that Tan Sri Lim Siew Choon (more commonly known as Tan Sri Desmond Lim) had emerged the largest shareholder of WCT, following the acquisition from WCT’s founding and controlling shareholders Taing Kim Hwa and Wong Sewe Wing 245.7m shares or a 19.7% stake in WCT for reportedly RM2.50 per share. Tan Sri Desmond Lim broke into the local property scene in a major way in recent years via his highly successful Pavilion Kuala Lumpur integrated development in the heart of Bukit Bintang. According to news reports, he is growing his portfolio of properties which includes Pavilion Bukit Jalil, Pavilion Damansara Heights, Pavilion Embassy Kuala Lumpur along Jalan Ampang, da:men @ USJ1 in Subang Jaya and SK One Residence in Seri Kembangan.

We believe his entry into WCT could be a precursor to a massive restructuring of WCT. WCT could be transformed into his flagship listed property company via the injection of his portfolio of privately held property projects. WCT’s completed investment properties such as Paradigm Mall PJ, BBT Shopping Mall in Klang and Gateway @ KLIA2 may be stripped and injected into Pavilion REIT or a new REIT controlled by Tan Sri Desmond Lim. WCT’s construction division may go for a separate listing. We believe it is too early to tell if the existing shareholders of WCT will benefit from the potential restructuring, as that depends on the structure and pricing of the assets and new shares to be issued pursuant to the restructuring. For now, we believe the only way the market should react, is to decide if it should immediately attach a “Tan Sri Desmond Lim premium” to WCT shares, based on his track record of corporate exercises involving public listed companies controlled by or linked to him such as Pavilion REIT, Malton and Global Oriental.

Others :

Thematic Report : China’s e-commerce: grows from strength to strength

YTL Power : Hold for dividends   HOLD

Banking Sector : Commercial Banking license awarded to China Construction Bank            NEUTRAL

               

ECONOMIC HIGHLIGHTS

Japan : Inflation outlook lowered

Malaysia : PMI suggests headwinds remain

NEWS HIGHLIGHTS

SP Setia : Expanding Shah Alam convention centre

Construction Sector : M’sian, Chinese firms sign agreements worth RM144bil

Consumer Sector : Better second half seen for gloves industry

Banking Sector : Kenanga Investment Bank to be listed tomorrow